My Investment Club Update

My Investment Club Update

It has been a few years since I started an investment club with a few friends, but I haven’t shared an investment club update in over a year, so I figured why not share what we have been up to, and as important (to me), how we have been doing.

Starting my Investment Club

I kicked around the idea of starting an investment club for years; one of the cool things about having a regularly updated personal finance blog is that I can actually track ideas with dates. It looks like the first inkling of an idea for an investment club occurred in 2008. My guess is that it was over scotch with a good buddy of mine (who is now a fellow partner in the current club). It took a few years but we eventually got it off the ground in February of 2013.

The idea was simple enough:

9 Individuals – each person had a relationship with me, although most knew each other

Created a legitimate LLC and have our taxes (pass through entity) done by a professional

It took a while to get a groove and we have had our hiccups. One month in I didn’t have a lot of faith,

One month in, I do not have a lot of faith in this club. As you can tell from the tone of the post, I am pretty bummed. The members in it are intelligent and all are very hard working in their own right, I am just sensing that this isn’t in the realm of caring for most. At this point, I got two trades in, I am just going to sit back and see if anyone else takes the reigns for a bit.

I think in 4.5 years of this club being in existence I had only 2 other bummed out moments in terms of “lets shut this thing down.” For the most part there are ebbs and flows with regard to who is active. It may be counter intuitive but I actually believe it works in our favor. You get different opinions at different times (except mine: I am always next to a computer you are always going to get my opinion).

Even More Details About How we Run our Investment Club

Whenever this topic comes up there are some basic questions people have when it comes to running an investment club. I am not sure if how we do things is the best way, but it has worked for this group of individuals.

How do we decide what to buy and sell?

It is a one person, one vote system with 6 votes needed to buy or sell with 24 hour wait time. If you receive 7 votes the action can be done immediately.

What Program do we Use to Communicate?

Originally we used Facebook Groups, however, I found that as our communications/ideas grew it was near impossible to create a timeline when it came to a particular holding. It was with a lot of back forth that we decided to move to Slack. We then created channels for each holding. This allows us to track a conversation with regard to a single topic. Obviously, there can be overlap but for the most part the channels are respected.

What if There is an Emergency?

Our group is unbelievably varied with regard to background, with one police officer, one firefighter, 2 attorneys, one paralegal, one financial planner, one business owner, an HR Executive and an IT Professional, but for the most part 6 or 7 people can be reached via text at any given time.

How Many Holdings Do You Have?

We currently have 28 positions, which somehow is the exact number of holdings we had 15 months ago! However, we have $20k+ more in equity so I guess it isn’t a completely terrible thing. Personally, I think the number is too many, but a lot of the smaller positions (sub $1k) are either from taking a massive hit or legacy positions when we bought $500 positions.

What Have Been the Biggest Obstacles in Running an Investment Club?

The biggest obstacles I feel that we have faced have very little to do with the business being an “investment club.” Actually given the liquid nature of our holdings we could technically close shop tomorrow with very little fanfare. The biggest obstacles we have faced, in my opinion, is meshing 9 different people, from different walks of life, with different risk tolerances, and forcing them to run a business together. I couldn’t imagine running any other business with 9 partners!

Performance of My Investment Club

First and foremost, I think it is commendable that negative performance from a particular member is rarely if ever called out. Why is that important? One, it does not deter anyone from coming forward with an idea. Second, this is a business where everyone is a partner – no one should feel uncomfortable within their own business.

Here are our performance numbers since inception:

Our gain is the difference between the two lines, however, these numbers can’t be looked at in a vacuum. If we are getting destroyed by the benchmarks, why continue to do what we are doing?

Well we are destroying any and all benchmarks you may look at, but let’s get some caveats out of the way:

We happened to start this club in the middle of an unprecedented bull run; and

The recent run up was due to a buy out which is unlikely to be replicated; and

The combination of the previous two caveats leads to a lot of that gain to be pure dumb luck

Notwithstanding those caveats, I can still be excited regardless whether it is due to luck or not. I do know there is something we are fantastic at – we do not panic. As a group, we have held positions that have gone negative, for years and even dollar cost averaged down in some cases increasing our future gain. This obviously can be a positive or negative depending on the position.

Future of The Investment Club

Our original intent was to meet annually, but that has turned into every other year. That seems fine for right now. At our last meeting in January of 2016 we discussed a few topics that have all but fell off anyone’s radar. The first was to get into options and even possibly shorting stocks. The second involved real estate. Neither is going to realistically happen, ever, under the current direction of the club…and that is just fine with me! I can’t even begin to try and wrap my head around how either of those topics would be implemented.

If I had to guess, and it would be a pure guess, we will continue the club as is until we hit a bear market. I don’t believe the strength of the group would be able to withstand a long duration of negative returns. If we do get through that thought (whenever it may come) it would be interesting to see us come out the other side!

Share This Story, Choose Your Platform!

Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

2 Comments

Thx for sharing an update. It sometimes on my mind to start a club to meet like minded people… I have I can do that via my blog, so it may not be needed. And I dislike the idea of having no easy access to that money in the club

I like the idea of the club. I hear on communication though. It’s tough, we all live such busy lives. Slack is a great way to connect and make decision together. I use Slack all day, work, home, friends, etc. It’s awesome.

My Journey to Millions

My Journey to Millions is an 8 year old personal finance blog focused on topics including basic personal finance issues, advanced insurance planning, high net worth estate planning. In addition, there is a particular focus on dividend growth investing and option trading.